A corporation (the DLCC), which had been operating a club for the purposes of pleasure and recreation of the members and of the community was, as a result of the repeal of its governing Act (the “DLCC Act”), continued under a Corporations Act as a non-share capital corporation, so that the DLCC shares were exchanged for membership interests.
Was there any disposition on the conversion of the DLCC from a share- to a non-share capital corporation? CRA responded:
If, as a matter of law, the shares of the DLCC were converted to membership interests without the shares being redeemed, acquired, or cancelled, we would not consider the shareholders to have disposed of their shares provided the rights and privileges of the shareholders have not been modified in a substantive way. For general guidance on when a modification to the rights and privileges attached to a share may, or may not, result in a disposition, see … IT-448 [paras. 9-16].